Landi, President of Faib: “Combat illegality and rationalise the network” to emerge from the crisis
The President of the distributors’ association proposes a series of priority interventions to revive the sector and provide consumers with a more modern service
Interview with MARTINO LANDI, President of Faib – Independent Italian Service Station Federation
The Covid-19 crisis has severely impacted the fuel distribution sector since it also overlapped pre-existing problems. The current phase is still in the balance and heavy-going for operators, while short-term prospects are far from encouraging. This is the snapshot outlined by Martino Landi, President of the Independent Italian Service Station Federation (Faib). Landi makes no bones about his concern and, at the same time, indicates a number of directions to change the course of things: combating illegality, rationalising and modernising the network.
The coronavirus emergency, said Landi: “has had a devastating effect on our sector. This is the result of falling sales, that in the lockdown period shrank by 90%, as well as the knock-on effect that this crisis has had for fuel distribution.” “This crisis,” Landi explains, “has affected a sector already in serious difficulty, left to its own devices by the owners of its assets, thereby highlighting a lack of industrial strategy, with several oil multinationals that have withdrawn from our market or have decided to operate here exclusively as a sales terminal, as in the case of Esso. The departure by large oil groups has caused the fragmentation of the network and the rise of new independent operators, often poorly structured, lacking strategies, unscrupulous and ready to grasp – and exploit – the here and now.”
“At the end of this inward-looking process, mechanisms were set in motion that encouraged increasingly widespread illegality that in turn took various forms – from VAT evasion scams to illegal imports of petroleum products – as well as exploitation of plant workers through contractual dumping practices and circumvention of sector regulations, all in a time of major difficulties arising from significant falls in sales,” Landi complains. “All in all, this triggered unfair competition that diverted resources from the sector and penalised better structured operators who would otherwise invest to modernise a network no longer able to meet the challenges of the future,” Landi added.
After the most acute period of the emergency, Landi went on, “we are now in a delicate phase which, despite lifting restrictions on free circulation, has not yet seen volumes return to those prior to the pandemic; equally, an urgent need is felt to invest in technological innovation and alternative fuels respecting the environment and product quality.”
For Landi, this phase is also having a major impact on distributors: “In this context, the financial performance of our associates – already in considerable difficulty given falling volumes – also saw sales drop to zero during the lockdown period and management overheads increase, driven by regulations to combat illegality whose costs have been entirely passed on to us: mention can be made of electronic invoicing, IT notification of payments, and new and increasingly widespread forms of electronic payment that have blown bank commissions utterly out of proportion.” “All this in the absence of agreements that would regulate and update the economic conditions of a category that suffers from the abuse of a dominant position imposed by plant owners, who are increasingly willing to ignore sector regulations with the approval of a distracted government that seems unaware of the continuous reports of exploitation resulting in tax evasion and non-payment of social contributions causing substantial damage to tax revenue,” Landi adds.
Landi does not envisage that improvements will emerge in the short term: “we currently do not see any signs on the horizon that can reassure us as regards a lasting recovery that will help us overcome this phase. We have not yet emerged from the risk of pandemic, consumption is stalled and will not return to pre-Covid levels. Tourism continues to suffer from the lack of international visitors; Italians are also changing their habits as a result of smart working. The efforts by the Italian government, in deploying resources destined for companies and workers alike, are not and will not be sufficient to kick-start consumption.”
The President of the trade association suggests that the commitment of the European Union will have an impact but not in the short term: “Of course, the funds made available by the EU will make a difference but the results of such intervention will only emerge in the future, while our sector needs immediate structural intervention since, otherwise, only those who move outside the boundaries of legality will survive, those ready to abandon this market without scruples, exploiting the absence of rules and the indifference of the government towards a sector that ensures the mobility of both people and goods.” However, Landi feels that if European funds “are managed correctly by the government in accordance with the principle of technological neutrality and targeted with foresight, they may well promote the repositioning process of the public and private mobility system towards clean, tracked-traced and sustainable energy that would find its natural allocation in our service areas.”
Landi also acknowledges the efforts already made: “We must acknowledge that the government has made available – not only to our category but to the production world as a whole – targeted short-term resources to avoid forced closures. These include recognition of special layoff benefits, non-repayable funds made available to service station managers and postponement of tax deadlines to offset cash flow lost in this period. Naturally, much more and much better could have been done. These are all short-term interventions that, in being one-off measures, provide no assurances for the future of the sector.”
Landi feels that further action is needed: “Today, if the government is to make a difference, it should at last take an interest again in our sector and listen to our proposals. First of all, far-reaching rationalisation of the network with the closure of at least eight/ten thousand incompatible and marginal service stations, with low volumes and no environment-friendly products, thereby freeing up resources to be distributed across the remaining network to ensure investments in technological and environmental innovation, including alternative and low-pollution products. We can no longer afford to keep service stations running on low volumes that do not justify their survival, unless through non-transparent forms of supply.”
Landi indicates a number of priorities in the sector: “From our point of view, the challenge for the future is based on these three aspects: combating illegality, rationalising the network and modernising facilities and areas. Only joint efforts involving all operators in the sector, who must return that lost sense of responsibility and correctness to the heart of the matter, will lead us out unscathed; otherwise, there will be no future for anyone and the network will no longer be able to guarantee the mobility services essential for a modern country.” Lastly, the President of Faib concludes, “within this process of renewal, we must redesign spaces for independent management on the part of distribution entrepreneurs, eliminate the barriers between managers and oil companies that prevent the fullest use of entrepreneurial and professional energy and skills, to create the service station of the future in turn open to many other services that Italian consumers are still hoping to see.” “This means reviewing the pricing architecture and management models of these facilities. We are working extremely hard on these issues,” Landi summed up.